"The biggest risk facing the U.S. is that it succumb to a trade war with its trading partners, Harvard University economist Kenneth Rogoff said Thursday.
Speaking at a seminar sponsored by the Council on Foreign Relations, Rogoff said that despite all the talk of “currency wars,” the world has so far kept trade relatively free since the economic crisis of 2008-2009. (Read a related interview with Rogoff.)
But he warned that if high unemployment in the U.S. persists, policymakers in the Washington will find it hard to resist pressure for sanctions against China and other countries.
“There are a lot of angry voters out there,” Rogoff said. He was speaking along with Raghuram Rajan of the University of Chicago Booth School of Business in a session dedicated to the topic of “currency wars.”
Rajan said the term, which harks back to the 1930s but was revived by Brazilian Finance Minister Guido Mantega last year when he complained that the Federal Reserve’s monetary stimulus was forcing other currencies to appreciate, is a bit of misnomer. Countries aren’t really engaged in real conflicts yet and, while they complain about the Fed’s stimulative policies, their central banks’ failure to let their currencies rise is amplifying its effect and contributing to “higher and higher rates” of inflation across the emerging-market world..."
at http://blogs.wsj.com/economics/2011/02/10/rogoff-and-rajan-discuss-risks-of-currency-war/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29
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